Pressure Mounts on Anthem Blue Cross to Explain Rate Hike Proposal

Pressure continues to build on California health insurer Anthem Blue Cross, as Health and Human Services Secretary Kathleen Sebelius has rejected the company’s explanation for a proposed rate hike in the state.

The controversy began last week when the Los Angeles Times reported that Anthem, a division of insurance company WellPoint Inc., planned to increase premiums up to 39 percent for customers with individual policies in the state.

In a moment of fever-pitch public debate over health care costs and health reform, the news has generated public outcry and official investigations — including angry words from California’s two Democratic senators, a letter from Sebelius demanding an explanation for the rate hike, and a planned hearing on Feb. 24 before the House Energy and Commerce Committee’s Subcommittee on Oversight and Investigations, at which WellPoint CEO Angela Braly will be called upon to testify. California insurance commissioner Steve Poizner has also said he plans to investigate.

WellPoint said Thursday that the economy and rising medical costs are behind the rate hike, as healthy people have been forced to drop coverage or switch to cheaper plans during the recession, leaving only sicker people — who are more expensive to cover — enrolled in the company’s plans. WellPoint also said that the 39 percent reported increase represents the largest possible raise in rates and includes adjustments for age — the actual rate hikes, excluding an age factor, would range from 20.4 to 34.9 percent, the company said.

But on Thursday, Sebelius said in a statement that it remains “difficult to understand” the rate hike given that WellPoint reported a $4.75 billion profit in the last quarter of 2009.

Those profits, and the profits of other major insurers, were the focus of a report and conference call Thursday by the health reform advocacy group Health Care for America Now. Fanning the flames, the group released a report that pointed out that the nation’s five largest insurers had earned record profits in 2009 while covering 2.7 million fewer customers in private health insurance plans.

HCAN president Richard Kirsch said that the five largest insurers saw profits increase 56 percent in 2009 — a recession year. Companies are increasing their profits, Kirsch said, by deliberately shedding their sickest private-plan customers and turning to enrolling more people with plans subsidized through government spending, such as Medicare.

“It’s clear from earnings reports that reduced enrollments in private plans correlates with higher profits,” Kirsch said. “What the big insurance companies do to please Wall Street denies affordable health insurance to millions of Americans each year.”

But Robert Zirkelbach, spokesman for the insurance industry group America’s Health Insurance Plans, said that that’s a misreading of the situation, and the decline in private-plan customers is due to the recession.

“There are economic factors contributing to the decline [in private coverage]. Many employers are scaling back the coverage they offer to their employees,” he says. “And the reason that insurance costs are going up and adding pressure is that the underlying cost of health care services is going up.”

Kirsch counters that even in good times, insurers are losing private-plan customers because their rates are rising so much faster than inflation.

“Both things are going on,” he says. “Some of it is outside their control. But some of it is actively trying to get rid of [less healthy] customers.”